Curbs on loans drive borrowers to higher-cost savings banks
Tighter lending restrictions at commercial banks are pushing more borrowers toward savings banks where interest rates are significantly higher, as the government continues its drive to rein in household debt, according to industry officials Wednesday. Annual interest rates on mid-interest loans for borrowers with low to medium credit scores range from 9.7 percent to 16.2 percent, roughly two to…
As commercial banks tighten lending restrictions, borrowers are increasingly turning to savings banks for loans, according to industry officials. Savings banks offer higher interest rates, ranging from 9.7 percent to 16.2 percent, compared to the 3.2 percent to 7.1 percent for commercial bank loans. This shift is part of the government's efforts to curb household debt, as borrowers seek alternative financing options.
In the first half of this year, savings banks issued over 491,000 mid-interest loans, a 14 percent increase from the second half of last year, making it the highest level on record. The Korea Federation of Savings Banks expects the annual tally to reach 1 million for the first time. The trend is driven by banks' tightening access to household credit, which was once the primary source of financing for consumers.
In July, KB Kookmin Bank reduced the maximum mortgage available to individual borrowers nationwide from 600 million won to 300 million won, while other major lenders have also restricted online lending channels.
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- Curbs on loans drive borrowers to higher-cost savings banks koreatimes.co.kr
